Why Smart People Make Poor Investment Decisions

  By Matthew Jentner
Matthew Jentner

With the bursting of the tech bubble in 2000 and the great decline of 2008, 2000 through 2009 has been called the “lost decade.” With the current slow recovery, market volatility, and unsustainable government spending, people are struggling to find the “right way” to invest.

It is not uncommon for smart people to make poor investment decisions. During these challenging economic times, investment success begins with you.

 

What are your expectations?

•    Are you looking for a safe haven to avoid market volatility?
•    Are you looking for a manager with “inside information” to beat the market?
•    Are you looking for a manager who gets out of the market before it declines and then gets back in to catch the next upswing?

A primary reason for unsatisfactory investment outcomes is that outcomes do not meet investor expectations.

Examine your beliefs.

•    Do you believe that if someone does enough research that they can predict what investments will do?
•    Do you believe the world is coming to an end?
•    Do you believe Wall Street has rigged the investment world so there is no way you can win?
•    Do you believe governments provide economic growth?
•    Do you believe that people with the freedom to work in private and public businesses provide economic growth?

The point is: How you answer these questions will determine your investment expectations, which will influence your investment decisions, which will impact your investment experience. Investment success begins with you. You must build realistic investment expectations built on economic reality, not economic utopia or fears.

For more insight, listen to Jentner Wealth Management’s weekly podcast by clicking here. Or download Jentner’s white papers on The Four Cornerstones of Prudent Investing and The Active Versus Passive Investing Debate.